Apartment developers gear up for tariffs

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As executives at Houston-based Camden Property Trust underwrite their apartment developments with tariffs on the horizon, they're only figuring in a 2% to 3% increase in construction costs.
With the ever-changing threat of tariffs from President Donald Trump, that number may appear suspiciously low. But it's not a mistake, according to Camden CEO Ric Campo.
'The reason it's not more is that we've been to this movie before,' Campo said on the REIT's first-quarter earnings call last month. 'Under the [Trump] administration 1.0, there were tariffs and there were issues, and COVID created a lot of interesting supply chain issues, as we all know.'
That tariff and pandemic experience created a practice run for apartment developers, setting them up to meet 2025's challenges. 'What a lot of folks have done, including the apartment industry and construction industry, is we have tried to get our supply chain closer to our projects, and a lot of effort has gone into getting supply chains that are not as vulnerable as Asian supply chains,' Campo said.
Though those experiences have helped apartment developers plan for tariffs 2.0, there are still challenges this time around. There is a universal 10% tariff on all imports this time, and uncertainty lingers, with the timing and scale of Trump's levies remaining a moving target.
Then there's the issue of legality.
With the U.S. Court of International Trade striking down April's 'Liberation Day' tariffs on Canada, Mexico and China last week, questions linger about whether the trade war will end before shots are really even fired. A day later, the U.S. Court of Appeals for the Federal Circuit stayed that ruling.
But even with the ground shifting beneath them, apartment developers have to plan for the worst, which includes high prices and potential shortages for the materials and products they need to complete their projects. Here is how they're preparing.
Count Rene Bello, founder and CEO of Miami-based real estate investment and development firm BLDG Ventures, among those dusting off his playbook from the first Trump administration.
'Because we have had experience with this before, we're looking at retooling on some of the strategies we use,' Bello told Multifamily Dive.
For Bello, preparing ahead means cutting out the middleman for price-sensitive materials. He went directly to vendors to order 75,000 square feet of flooring for an entire building, for example, six to 10 months ahead of time. 'We can buy in large quantities, well in advance,' he said.
In other cases, Bello is flying to other countries to line up materials. During the winter, he met with his Colombia-based glazing manufacturer.
'We knew that we need to get ahead of that, and then we just had a very clear and honest conversation with our contractors and our suppliers about how can we effectively get on their books well in advance rather than waiting six to nine months down the pipeline and then having to absorb the full run on these tariffs,' Bello said.
Bello isn't the only executive buying more than he currently needs before he needs it. Cameron Gunter, co-CEO of PEG, a Provo, Utah-based owner, operator and developer of multifamily, hospitality and build-to-rent properties, has two multifamily projects currently in development, with one in Tucson, Arizona, slated to open later this year.
'We bought a bunch of our cabinets out of China,' Gunter told Multifamily Dive. 'So we took our first shipment as we started to see this issue on tariffs. We haven't installed it, but it's all stored on property.'
With Trump's May 90-day pause on Chinese tariffs to allow for time to negotiate with different countries, Gunter expects to get his second shipment before the levies kick in. 'We'll be able to get those here in the next 90 days,' he said in May.
Bello isn't just ordering ahead to try to beat tariffs. He's putting his projects through a value-engineering process to avoid countries with the highest tariffs.
'We're not buying things from the Asian markets,' Bello said. 'We should see a higher pricing and tariff on those materials coming from those parts of the globe.'
But so far, the cost increases haven't hit all products in the same way.
'We're seeing, on average, between 3% and 5% increases for trades like glazing, electrical [and] raw materials,' Bello said. 'With fixtures and lighting, you'll definitely see an increase between 10% and 20%. We're also seeing lead times extended.'
Bello is also opening the door to American-made products, like paints and bath fixtures. In May, he was on a call with an architect deciding between two options for toilets — German-made Toto and American Standard made in the U.S. The choice was easy, even if it wasn't what he wanted.
'As much as I'd love to put in a beautiful Toto bath fixture, we said, 'Look, American Standard is American made,'' Bello said. 'We know that there won't be any tariffs implemented on those American-made fixtures. So we'll go in that direction.'
PEG also builds hotels, which require it to purchase furniture, fixtures and equipment. With many of those products, the firm is sourcing from new countries. 'We shifted from China to Vietnam or Taiwan,' Gunter said.
But Gunter said there are limits, specifically related to costs, to buying what is produced in America. 'We're finding some ways around it,' Gunter said. 'I don't think the answer is sourcing stuff out of the U.S., unless rents really climb or AI takes [manufacturing] jobs because it's just tough [to make the numbers work].'
With about 4,500 units in annual starts, Tysons Corner, Virginia-based owner, manager and developer Middleburg Communities can lock in purchasing agreements with suppliers and vendors. So far, CEO Chris Finlay, who has seen tariffs push up costs roughly 3%, said his subcontractors are basically eating the costs of the increases as construction starts have fallen.
'Work is just more scarce now,' Finlay told Multifamily Dive. 'If you're a subcontractor, you're trying to win the business. Taking some tariff risk to win the deal is what I think a lot of people are doing.'
For PEG's Gunter, the goal is to share the burden of price hikes. 'I can create contingencies where they have it as part of their [guaranteed maximum price] and we use that contingency to cover any tariffs based on the general contractor piece,' he said. 'If it goes over that, there's a responsibility. If it comes under that, there's a shared savings clause.'
Still, Gunter said there are some questions about whether general contractors are willing to take those risks going forward, even if work is more scarce. However, even if subs are reluctant to eat the additional tariffs, general savings in labor prices may help developers offset the additional burden of tariffs.
On AvalonBay Communities' first-quarter earnings call last month, Chief Investment Officer Matthew Birenbaum said materials costs are generally 25% to 30% of the Arlington, Virginia-based REIT's overall hard costs and 20% of total project costs.
While tariffs could push overall costs by 3% to 4%, a reduction in labor prices could offset some of that. 'On those jobs we are actively bidding today, our phones are ringing off the hook with deeper bid coverage and stronger subcontractor availability than we have seen in years,' Birenbaum said.
Brad Hill, CEO of Memphis-based REIT MAA, said his development team is getting the same calls. 'Given the reduction in the new starts and the supply pipeline, we're getting better pricing at the moment from many of our GCs and development partners,' he said on the REIT's first-quarter earnings call last month. 'Margins are tightening up a bit, and they're getting a little bit hungrier for new starts.'